WASHINGTON, Sept. 11, 2013-- The U.S. biodiesel industry appears headed toward another banner year, driven in large part by a $1-per-gallon production tax credit extended by Congress through the end of 2013.
EPA late last month announced that biodiesel production for the month of July reached 132 million gallons and year-to-date volume is at more than 768 million gallons.
Industry officials say biodiesel is the first EPA-designated “advanced biofuel” – a category that includes alternative fuels with at least 50 percent fewer emissions than gasoline – to reach 1 billion gallons of annual production. The industry has surpassed targets set under the federal Renewable Fuel Standard (RFS) for two consecutive years and is on pace to produce more than the 1.28 billion gallons set under the RFS for this year.
The production volumes for July were reported under the RFS’s biomass-based diesel category, which actually showed a total of more than 166 million gallons produce in July, including 34 million gallons of renewable diesel.
The RFS aims to reduce oil imports and cut back auto emissions with cleaner-burning fuels. The advanced biofuels category includes cellulosic ethanol, biomass-based diesel, and sugar-cane based ethanol.
However, cellulosic ethanol has yet to achieve a production level significant enough to seriously contribute to an RFS-mandated 16.55 billion gallons of renewable fuel required to be blended in the nation’s transportation fuel supply this year. EPA has set a cellulosic requirement of just 6 million gallons this year, a mere fraction of the 1 billion gallons originally set for 2013 when the RFS was updated by Congress six years ago. Recent reports indicate that cellulosic producers will not meet the even smaller volume requirement.
As a result, biodiesel can make up the difference in the advanced biofuels requirement and enable refiners and blenders to meet their EPA-mandated production requirements.
Made from a diverse mix of feedstocks such as recycled cooking oil, soybean oil and animal fats, biodiesel is the first and only EPA-designated advanced biofuel with commercial-scale production nationwide.
The RFS, which has been under attack in Congress by lawmakers sympathetic to the oil industry, received a boost when Environmental Entrepreneurs (E2), a coalition of business leaders, released a study showing capacity projections are sufficient through 2016 to meet advanced biofuel requirements under both the RFS and California’s Low Carbon Fuel Standard (LCFS).
The E2 report says capacity in the industry continues to grow, and biodiesel remains the dominant advanced biofuel today and through 2016.
E2 also cites federal and state policies – specifically the RFS and the LCFS – and substantial public investment in the advanced biofuel industry from USDA, DOE and the Department of Defense as principal drivers of growth.
However, “regulatory certainty, including the continued existence of renewable fuel policies, the permitting of pathways, noncompliance fees paid by oil and gas companies, and agency reaction to market conditions, remains unstable and is a barrier to commercialization for many projects,” E2 says in the report.
Looking towards 2016, E2 says there is real potential for advanced biofuels to scale up, noting that “numerous facilities are on track towards commercialization, and the industry is moving steadily forward. New investments and regulatory certainty will help ensure the successful commercialization of these projects.”
That’s support appreciated by the National Biodiesel Board (NBB), which has cited the importance of the production tax credit in driving industry growth while urging members to reach out to Senate members who are undertaking a bipartisan effort to reform the tax code. Lawmakers say they are beginning with a "blank slate" and the NBB is calling on members to demonstrate why the production tax credit needs to be continued beyond 2013.
Meanwhile, the E2 study says drop-in renewable hydrocarbons, which may be blended directly into standard gasoline, diesel, or jet fuel, show significant progress and are expected to contribute more substantially to overall advanced biofuel capacity over time.
Research presented at the American Chemical Society’s annual national meeting last month demonstrated that pilot plants using a technology called integrated hydropyrolysis plus hydroconversion (IH2) could cheaply produce a finished, ready-to-use liquid hydrocarbon fuel with 90 percent less greenhouse gases per gallon than fossil fuels.
The renewable hydrocarbon process can use what scientists say is “virtually anything” as a feedstock, including wood, cornstalks and cobs, algae, aquatic plants and municipal solid waste. And while the process includes hydrogen, which traditionally comes from coal or natural gas, the IH2 process generates its own hydrogen.
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